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What if Investors Could Help You Buy Your House?

Written by: Ross Kenneth Urken07/17/13 - 1:45 PM EDT

"A nation of homeowners is unconquerable." -Franklin D. Roosevelt

NEW YORK ( MainStreet)--Homeownership is a daunting, at times seemingly unattainable dream for many Americans--what with total student debt at $1 trillion , a national unemployment/underemployment rate at 14.3% and median household income dropping 7.8% since 2007. The average home price in the U.S. is a whopping $202,000, and the subprime mortgage crisis did nothing to quell anxiety. In fact, this year the American homeownership rate dropped to 65%, its lowest point since 1995.

But what if instead of taking out a mortgage from a bank you were able to go in with a number of investors and be the majority stake holder in the home equity?

That's the new system proposed by PRIMARQ, which is a capital market system that uses equity share finance to achieve two ends: first, to allow a person to become a homeowner of a property that otherwise would have been difficult or impossible to attain and second, to provide a platform whereby investors can gain exposure to the residential real estate asset class.

Whichever side of the equation you're on, this is a framework that is turning the housing market as we know it on its head.

The Mechanics

If you don't have 20% to put down on your house, you can simply co-own your house with investors. Or, say you're stuck in a 6.5% mortgage but don't have enough home equity to refinance? You can sell shares in your home to investors and make your domicile a joint venture.

Essentially, the home occupant can supplement a down-payment or qualify for mortgage refinancing such that he doesn't have to put all of his liquidity in a single basket.

When the house is sold and the bank is paid back, the owner-occupant and the investors share the profits.

Simply put, it works like so:

1) A residential property for purchase or refinance is submitted onto the PRIMARQ exchange, packaged with third-party data and posted as an offering to the investor side of the market.

2) Investors bid on a "Q" position, (1Q = $10,000 purchase equity holding), and submit funds to escrow on acceptance of that bid.

3) Funds are present and financial contingencies associated with PRIMARQ are met. The loan is approved based on lower LTV and DTI ratios.

4)Escrow and closing honors current methodology and schedule and homeowner enjoys full occupancy and improvement rights.

5) Each investor enjoys appreciation and liquidity through access to the secondary market for Q trading.

Put another way, this is crowd-sourcing capital for your home.

In fact, twelve years ago, PRIMARQ CEO Steve Cinelli, a veteran of the banking world and private equity, founded Off-Road Capital, a crowd-funding site (a decade early) that leveraged the power of the Internet in capital formation--to connect those in need of funds with those in possession of them.